Question
Banks sometimes quote interest rates in the form of add-on interest. In this case, if a 1-year loan is quoted with a 13.0% interest rate
Banks sometimes quote interest rates in the form of add-on interest. In this case, if a 1-year loan is quoted with a 13.0% interest rate and you borrow $1,000, then you pay back $1,128. But you make these payments in monthly installments of $94 each. |
a. | What is the true APR on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Use a financial calculator or Excel.) |
APR | % |
b. | What is the effective annual rate on the loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) |
Effective annual rate | % |
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